US NFP printed 517’000 last Friday. More than half a million.
It’s a monstrous gap with the 185’000 expected by analysts. And even if the seasonal factors may have affected the January report… 517’000 jobs, is quite a STRONG number for a monthly NFP report.
The unemployment rate unexpectedly fell to 3.4%. That’s the lowest level since 1969.
And the wages growth has been parallel to the 0.3% expectation by analysts on a monthly basis, and fell from last month’s 4.8% to 4.4% on yearly basis. But that 4.4% was, again, higher than the 4.3% expected by analysts.
So, Friday’s jobs report was a monstrous beat, from all perspectives. It was a monstrous slap on the Federal Reserve (Fed) doves’ face, as the latest US jobs data was nowhere close to an economy that’s supposed to be slowing down, and eventually enter recession and call for a rate cut.
And it’s another reminder that the huge layoffs in big companies, and especially in big tech stocks remain the exception to the rule.
Strong jobs is bad news for the market, at least until the next US CPI release
Now, it’s too early to say whether the latest jobs data is good or bad news for the market.
It is bad news for the Fed, which is trying to loosen the US jobs market, which wouldn’t loosen.
But it would be less bad news if the impact on inflation isn’t significant.
To tell whether the latest jobs data is bad news, because the tight labour market continues boosting inflation, or good news, inflation remains on an easing path despite the rock-solid jobs market, we will have to wait until next Tuesday, when the US will reveal the January CPI report. Until fresh news, Friday’s jobs data is bad news for the market. Even more so, as the latest tech earnings, including Apple, Amazon and Google easily missed expectations.
In the FX
The latest US jobs data will likely support the US dollar bulls this week, as we don’t have much on the economic calendar that could temper Friday’s monstrously strong NFP read, and remind us that the US economy is still slowing.
Fed Chair Jerome Powell will speak at an event in Washington on Tuesday, and he will probably sound hawkish faced with the latest jobs report, if he says anything about it at all.
Plus, the fresh selling pressure on the Japanese yen will likely give an extra hand to the Fed hawks, on weekend news that the potential new Bank of Japan (BoJ) Governor, Masayoshi Amamiya will be dovish.
In the light of the latest macroeconomic developments, a revision to medium term outlook is necessary.
The dollar-yen’s latest jump above the 130 mark could be sustainable in the short to medium run, and the recovery could extend past the 50-DMA (132.60), into the 133 level, the minor 23.6% Fibonacci retracement on October to January decline, and into the 136.67, the major 38.2% retracement and which will distinguish between the actual bearish trend and a medium term bullish reversal. I still don’t expect the dollar-yen to reverse the medium-term bearish trend, but the upside potential is interesting before the major Fibonacci level is challenged for a real change in sentiment.
The EURUSD was hit last Thursday after the European Central Bank (ECB) lifted the interest rates by 50bp as expected, but the number of other 50bp hikes to come was reduced from ‘many many’ to ‘one more’ at Lagarde’s press conference following the meeting. So the softening ECB hawks after the ECB decision, and the confused Fed doves after the US jobs report sent the EURUSD below the 1.08 mark in more than two weeks. And because the EURUSD hit the psychological 1.10 mark just before the ECB decision, many traders were and will be happy to call it a good trade and retreat to the sidelines. We will likely see some support between 1.0685/1.0750 area, which shelters the 50-DMA, the positive trend base, and the minor 23.6% retracement on the September to last week rally. But the EURUSD will remain in the positive trend as long as it stays above 1.0475, the major 38.2% retracement. And I don’t see the pair sink below 1.05 with the information we have in hand today.
For Cable, things look ugly. Anyone who looks at the price chart could easily tell that this pair is under a decent selling pressure and it’s just a matter of time before the pair slips below the 1.20 mark. The next major technical level stands near 1.1950, including the 200-DMA, and the major 38.2% retracement on September to January selloff. A decline below that level could smash the last sterling bulls. But at least, the falling sterling helps the FTSE 100 to hit fresh all-time highs.
Elsewhere, the Adani selloff enters the third week, and things go from bad to worse as in increasing number of banks don’t accept Adani holdings as collateral anymore.
The Chinese spy balloon that was flying over some strategic points in the US, and that has been shut down, and that resulted in Blinken cancelling his trip to China is a sign of renewing tensions between US and China, and that could throw a floor under the gold’s selloff. But the price of an ounce will likely see a strong resistance into the $1900 level.
